TMI Blog2017 (1) TMI 1629X X X X Extracts X X X X X X X X Extracts X X X X ..... followed Hon’ble Supreme Court decision in assessee’s sister concern, namely Apollo Industrial Products P. Ltd for assessment year 1989-90 in which identical issue was decided in favour of assessee and against the revenue. Disallowance u/s. 14A r.w. Rule 8D - Held that:- Commissioner (Appeals) has, after analyzing the material on record, found as a matter of fact that the assessee had sufficient surplus funds at its disposal for making any investment in share and for business purpose and therefore, there was no nexus that could be established with the expenditure incurred by the assessee for earning the exempt income. - Decided in favour of assessee. Disallowance of loss on sale of shares - Held that:- It is true that the impugned shares were of unlisted companies; therefore, there is no data available for the prevailing market rate on the date of sale from the stock exchanges. All that has to be seen is whether the valuation of the shares is scientific and based upon facts and figures. We find that the valuation of shares is back by the certificate of Chartered Accountant which is exhibited from pages 119 to 123 of the paper book. A perusal of the same show that the C.A. ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A) and explained that there was no issue of bonus share during the year under consideration, the A.O. has disallowed the expenditure totally on the wrong facts. 6. After considering the facts and the submissions, the First Appellate Authority observed that there is no mention of ₹ 2,10,168/- under head Legal, duties, professional and legal charges . The First Appellate Authority found that the impugned expense was a routine yearly payment to National Depository Services Ltd., Central Depository Services Ltd., Bombay Stock Exchange Ltd. and National Stock Exchange Ltd. for the continuance of the listing of the shares. The ld. CIT(A) was of the opinion that such expenditure is of revenue in nature and deleted the same. Before us. The ld. D.R. could not point out any factual error in the findings of the ld. CIT(A). 7. After giving a thoughtful consideration to the facts in issue, we find force in the factual findings of the First Appellate Authority. The entire expenditure has been incurred for the continuance of the listing of the shares with the various authorities as mentioned hereinabove. We, therefore, do not find any error or infirmity in the findings of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt terms and conditions of various contracts in relation to the retention money and without recording his specific finding as to the method of accounting regularly followed by assessee upheld the order of the AO making the addition of ₹ 40,32,955/-. Hon'ble ITAT therefore restored the matter back to the file of Ld. CIT(A) with specific direction to decide the issue after analyzing the relevant terms and conditions of the contracts in relation to the retention money as to whether or not any amount retained by the respective customers actually accrued to the assessee in the year under consideration and whether this action of the assessee is in conformity with the method of accounting regularly followed by him. In compliance of this, Ld. CIT(A) after analyzing the terms of payments of purchase orders in respect of various parties has given a categorical finding that the retention of 10% money of total sales was due to specific terms and conditions for final payment mentioned in the customer purchase order. It was further held by Ld. CIT(A) that assessee-company has been following this system of accounting for the last several years and was accepted by the department. Not onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al and whatever retention money had not been shown in that year and realized in the subsequent year had been shown as sale proceeds in that year and offered for tax. It is in these circumstances that the Commissioner (Appeals) was of the view that there was no need to disturb the method of accounting followed by the assessee - company and also found no discrepancy in terms and conditions of purchase orders. The Tribunal has concurred with the findings recorded by the Commissioner (Appeals). 6. From the facts and contentions noted hereinabove, it is amply clear that the controversy involved in this case stands concluded in favour of the assessee and against the revenue by the above decision of this court. Under the circumstances, no question of law can be stated to arise as/proposed. This ground of appeal is, therefore, dismissed. 16. Respectfully following the decision of the Co-ordinate Bench and the Hon ble High Court (supra), we do not find any reason to interfere with the findings of the ld. CIT(A). Ground no. 2 is accordingly dismissed. 17. Ground no. 3 relates to the deletion of the addition of ₹ 21,82,933/- out of disallowance of ₹ 33,39,824/- u/s. 14A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % inc.in Total debt Inc/Dec. Total Fixed Reserve surplus) before ta turnover as on last dt. in debt investment assets 1 1998-99 1735.34 (350 capital) 4544.13 475.28 101 10% 1306.0 - 456.85 1050 2 1999-2000 194 1.28 (350 capital) 6440.55 512.68 200 42% 1321.49 15.4 1217.8 1121 3 2000-2001 2166.81 (350 capital) 6822.2 482.96 161 7% 1636.21 285 1216.3 1279 4 2001-2002 2270.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble High Court was seized with the following substantial question of law in Tax Appeal No. 928 of 2014:- [B] Whether the Appellate Tribunal is right in law and on facts in upholding the order of the ld. CIT(A) to delete the disallowance u/s. 14A of the Act ₹ 28,36,668/- on account of interest and administrative expenses when assessee had failed to discharge its onus to prove the nexus of interest free funds utilized for the purpose of making investments earning exempt income? 23. And the Hon ble High Court held as under:- 7. Insofar as the second question which relates to addition of ₹ 28,36,668/- under section 14A of the Act on account of interest and administrative expenses is concerned, the Tribunal has taken note of the fact that the matter had initially been restored to the file of the Commissioner (Appeals) with a specific direction to bring out clearly as to whether the borrowed fund had indeed been utilized in investment in shares/mutual funds for earning exempt income. The Commissioner (Appeals), with a view to carry out this direction analyzed the financial chart showing the financial summary of the assessee of the last seven years and foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at from our record that on 09.12.2015, the assessee did not press this ground of appeal and the same is dismissed as not pressed. 28. Ground no. 2 relates to the disallowance of loss on sale of shares amounting to ₹ 46,34,375/-. 29. The A.O. has considered this issue at para 4 of page 2 of his order wherein he has observed that the assessee has sold shares held as investment in its subsidiary companies. The following chart explains the factual matrix:- Sr No Particulars Qty Purchase date Sale date Sale value Cost/ FMV Indexed cost Transf cost Total cost LTCG 1 Johson Screens India Ltd 2371600 1/3/05 31/3A38 258504400 94864000 108895967 266450 109162417 149341983 2 Apollo Construction Proj Pvt Ltd 149700 26/6/02 31/3/08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.28 per share. The ld. counsel concluded by saying that the A.O. has not given any basis for rejecting this valuation. Per contra, the ld. D.R. strongly relied upon the findings of the revenue authorities. 33. We have given a thoughtful consideration to the orders of the authorities below. It is true that the impugned shares were of unlisted companies; therefore, there is no data available for the prevailing market rate on the date of sale from the stock exchanges. All that has to be seen is whether the valuation of the shares is scientific and based upon facts and figures. We find that the valuation of shares is back by the certificate of Chartered Accountant which is exhibited from pages 119 to 123 of the paper book. A perusal of the same show that the C.A. has done a scientific valuation as per the prescribed norms. Therefore, in our considered opinion, we do not find any error in the valuation so made. The Co-ordinate Bench of ITAT Delhi Bench in the case of Ashok Soni in ITA No. 4574/Del/2002 had the occasion to consider a similar issue. The relevant head note reads as under:- Capital gains-Computation-Actual sale consideration vis-a-vis fair market value-No material ..... X X X X Extracts X X X X X X X X Extracts X X X X
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